Telemarketing's Top Users Exempt From No-Call List

Some of the biggest users of outbound telemarketing, at least in terms of marketing dollars spent, won't have to worry about the national no-call registry at all.

That's because these telemarketing heavyweights include nonprofit fundraisers. According to the Direct Marketing Association's 2002 "Economic Impact: U.S. Direct Marketing Today," the top industry category in spending on outbound telephone marketing was educational services with $2.16 billion in 2001.

The study breaks industries down by Standard Industrial Classification, or SIC codes, a federal classification. The educational services category ranges from elementary, secondary and vocational schools and colleges to specialized institutions such as driving and cooking schools.

Educational fundraisers haven't been heard complaining about the no-call list for the simple reason that they're exempt from it. Federal no-call laws don't cover nonprofit organizations that do in-house telemarketing, and even those that use third-party, for-profit fundraisers are required only to abide by individual consumer requests not to be called, not the national no-call list.

The Council for the Advancement and Support of Education, a worldwide association of alumni relations professionals, was even "pleased" with the outcome of the Federal Trade Commission's new rulemaking on telemarketing calls, said Matt Long, director of government relations at CASE. It affirmed the FTC's longstanding policy of staying out of fundraising regulation.

Educational institutions trail only religious organizations in terms of annual fundraising dollars in the United States, Long said. And telemarketing remains a key channel for their solicitations.

"Annual fund calling is extraordinarily important," he said. "It's one of the key ways institutions do fundraising."

The no-call list is aimed at cold calling, which educational fundraisers also tend to avoid. Calls typically go to past donors, alumni and "friends" of a school, such as parents of alumni.

"I'd find it rare for them to actually call a whole community," said Amy Sechler, legislative director with the National Association of Independent Schools, which represents private K-12 schools with no religious affiliation.

Other big spenders on telemarketing also won't have to worry about the national list, which takes effect Oct. 1, because of the exemption for business-to-business telemarketing. For example, wholesale trade companies, which sell bulk items such as heavy equipment and non-durable goods, spent $1.49 billion on telemarketing in 2001, the DMA study found.

Other types of fundraisers also enjoy the nonprofit exemption. The social services category, which includes community organizations and fundraisers that provide services to the disadvantaged, spent $1.33 billion on telemarketing in 2001, the study found.

Yet it would be wrong to think that the majority of telemarketers won't have to worry about the no-call list. Industries following educational services on the list of top telemarketing spenders are real estate, depository institutions and insurance providers, and all will be affected.

The real estate industry spent $1.86 billion on telemarketing in 2001. Brokers enjoy exemptions from many state no-call lists, but the Federal Communications Commission's decision at the end of June to join the FTC's no-call list policy wiped out most state exemptions.

The real estate industry didn't expect the FCC to go as far as it did, said Ralph Holmen, associate general counsel with the National Association of Realtors. Furthermore, the FCC clearly stated that no-call rules apply to appointment-setting calls, which the real estate industry relies on.

The NAR has not decided whether to pursue legal action involving the new rules, Holmen said. However, he acknowledged that public sentiment -- as of the end of last week, more than 26 million telephone numbers had been registered to the list -- would affect the association's decision.

"Obviously, this is a very popular rule with consumers," he said. "There is the consideration that if we were to challenge, it might not sit well with consumers."

Financial marketers, including banks and insurance providers, also lost their exemption from the no-call list because of the FCC decision. Financial firms are outside the jurisdiction of the FTC, which initially launched the list, but within the scope of the FCC.

Depository institutions, which include banks, lenders and credit unions, spent $1.83 billion on telemarketing in 2001, the DMA said. Credit card telemarketing is a common source of telephone solicitations.

At deadline, representatives of the American Bankers Association had not responded to requests for comment.

Insurers, who spent $1.76 billion on telemarketing in 2001 according to the DMA, could lose $4 billion to $6 billion in overall premium revenue from direct marketing next year as a result of the no-call list, said Don Jackson, an insurance DM consultant.

He said insurance revenue from direct marketing has grown every year since his agency began tracking the figures in 1990, but that after this year, in which revenue is projected to reach $183.6 billion, a stall is expected for 2004.

Most insurance telemarketing includes upselling and cross-selling existing customers, Jackson said. Insurers also cross-sell to customers of third-party partners that endorse their products, but a good portion of the calling is cold calling, including lead generation and appointment setting, done by or on behalf of local insurance agencies.

Insurance providers won't stop marketing, nor are they likely to flood consumer mailboxes with direct mail, Jackson said. They likely will do a balanced shift into a variety of different media, and insurance telemarketers will lose jobs.

"This very efficient media channel for marketing is going to become inefficient," he said. "When something becomes inefficient, you don't do it anymore."

Other top telemarketing spenders in the DMA study include:

Communications: This sector spent $1.04 billion in 2001. The telecommunications industry is a major user of telemarketing, both for cross-selling and upselling its own customers and for acquiring new ones, particularly from the competition. However, some major telecoms already have reduced telemarketing because of consumer backlash.

One is Qwest, Denver, which trimmed telemarketing as much as 40 percent last fall as part of a campaign to regain its customers' good will. The company still does cold calling, and will continue to do so, but it is working harder to target calls and make appropriate offers to consumers, Qwest spokeswoman Carey Brandt said.

Telecoms might be tempted to move their telemarketing money to other media, such as direct mail, but Brandt said Qwest already is putting as much as it can into the other channels.

"We have a really nice marketing mix," she said.

Personal and repair services:This sector, which includes local services to individuals such as repair shops, electricians, home improvement and maintenance and other small businesses, spent $1.4 billion in 2001. The main concern for such companies is the cost of complying, which tends to weigh heavier on small businesses with few capital resources, said Jeremy Claeys, director of communications at the National Small Business Association.

"The smaller they are, the bigger the burden,&amp;quot; he said. But the association isn't opposed to the no-call list in principle, Claeys said. The good news for small businesses, which generally only do local calling, is that the first five area codes of the national list they obtain come free of charge.

Security and commodity brokers: This sector, which spent $1.31 billion in 2001, is still assessing the effect of the no-call list, said Dan Michaelis, spokesman for the Securities Industry Association.

"It's going to vary from firm to firm, depending on their marketing approach," he said.

Investment brokers don't do much cold calling, using telemarketing to pitch and cross-sell existing customers, Michaelis said. Cross-selling has become more popular since the federal government allowed financial firms, such as banks, to offer a wider variety of investment services.

One major user of telemarketing that didn/t make the DMA list is the circulation industry. Publications such as newspapers and magazines depend on telemarketing for acquisition and retention.

The North Carolina Press Association told state lawmakers last month that telemarketing generates half of all new newspaper subscriptions. For magazines, telemarketing was the industry's fastest-growing source of new business through last year, a trend the no-call list certainly will affect, said Dan Capell, editor of the Capell Circulation Report.

"It should have no impact on the renewal side because they're current customers and they can be called," he said.

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